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While some wonder how Cambodia's banking system defies economic gravity, others see the answer in soap suds. "Money laundering. Banks need to show some legitimate economic activity and they are prepared to pay quite a high price for it," says Tioulong Saumara, a former deputy governor of the central bank.

Cambodia has no law against money laundering and scores high on a checklist of things money-washers most like to see, like unrestricted movement of capital and a cash economy full of foreign currency. But most bankers say the size of the banking industry and the country's reputation would prevent them from laundering money just by transferring it offshore.

"Dirty" money - made by selling drugs or illegal weapons, for instance - almost always comes in cash and usually large amounts of it, which is hard to use without arousing suspicion, so criminals "clean" it by hiding it in legitimate activities.

The simplest way to do this is to put the cash in a bank that does not ask too many questions and then transfer it to a bank in another country.

Bankers in Cambodia get huffy when accused of this and, in any case, most banks here say they would have difficulty sending large sums to other countries.

"Our transaction volumes are so small, we couldn't hide any laundering," said Pung Kheav Se, manager of the Canadia Bank. "Our correspondent banks would be the first to wonder. Canadia Bank always sends through 10 or 20 thousand (dollars), and here they are sending a million. They would ask me right away."

Central bank officials say they check monthly transaction reports submitted by banks and investigate anything unusual.

Some question the bank's capacity to do that effectively. "We are trying to move them over from ledgers to computers, but at the moment there are only about 30 computers in the bank, and 12 of them are used for training," said a United Nations adviser working on financial reform.

Bankers say they will not transfer money out of the country unless they can trace it to a legitimate source. But in Cambodia, where checks are still curiosities, criminals find it easy to pay in cash for major investments.

"You take your cash, buy some land, pay the builders, build a hotel. Then the money that hotel generates is clean," said a foreign banker.

To some, that sounds too much like hard work. "You can register a five-room house as a 100-room hotel and just pay someone for the big red stamp that makes it official. There's no way of checking." said Saumara.

For her, the information black hole is a lodestone for dirty money. "When the track leads to Cambodia, the track stops. There is no central agency, there are no records. What can you do?"

Cambodia's two legal casinos are also favorites with washermen. They buy chips at a premium from other gamblers, then cash them in as winnings and get a check from the casino - nice, clean money.

Some think Saumara's complaints are politically motivated. She left the central bank last year saying vested interests were preventing action on money laundering and now supports her husband, ex-finance minister Sam Rainsey, the leader of an opposition political party.

True or not, Cambodia's reputation as a money-laundry is growing. A recent report from Thailand suggested laundering had decreased there because criminals heard the suds were better in Cambodia.

Copyright 1996 Asia Times.

(c) 1996 Chamber World Network International Ltd.